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News & Press: 2018 News Items

A practical approach to the VAT rate increase to 15% on 1 April 2018

Friday, 16 March 2018  
Posted by: Bert vd Heever
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The following extract is taken from an article released on the internet by KPMG entitled, South Africa: VAT rate increases to 15%, effective April 2018” and dated, 21 February 2018;

Given the VAT rate increase, the following rules apply;

  • If the goods or services have been provided before 1 April, then the current VAT rate (14%) applies. The new VAT rate of 15% does not apply.
  • If the goods or services are to be provided on a periodic basis or over a period that falls both before and after the effective date of 1 April, then an apportionment must be made on a fair and reasonable basis. The 14% VAT rate will apply to the portion before 1 April 2018, and the VAT rate of 15% will apply on the portion of the supply of goods or services from 1 April 2018.

This is supported by additional detail provided in an article released on the internet by Baker McKenzie entitled, Practical considerations of the VAT rate increase as of 1 April 2018” and dated 1st March 2018;

The transitional (rate) specific rules are described as follows:

  • Goods are provided, or services are performed for the period before 1 April 2018 – VAT at the “old” rate would apply, irrespective of the time of supply of such goods or services (whether it occurs before or after 1 April 2018). In this rate-specific transitional rule “goods” exclude the sale of fixed property.
  • Supplies commencing before and ending on/after 1 April 2018 – where goods are provided, or services are performed during a period commencing before 1 April 2018 and ending on/after 1 April 2018, the value of the supply (i.e. VAT exclusive amount) must be apportioned on a fair and reasonable basis with respect to the pre (i.e. 14%) and on/after (i.e. 15%) 1 April 2018 period. Typically, goods supplied under rental agreements, goods supplied progressively/periodically, goods or services supplied in the construction industry, or services rendered over the period of the agreement, would be applicable here.

Given the information provided in the two blocks above we asked senior members of the ASAQS for their advice. The following practice is recommended by them when preparing a monthly payment certificate for work done and materials and goods supplied in March 2018;

  • 14% VAT will be applied to the March 2018 payment certificate. An accurate valuation excluding VAT of the work completed and materials and goods supplied up to and including the 31st March 2018 should be undertaken. The valuation should be fair and reasonable. This may necessitate making special arrangements with the client and the main contractor where the dates stated in the contract for the issue of payment certificates are earlier than 31 March 2018.
  • 15% VAT will be applied to the payment certificate for April 2018.  
  • For projects where retention is applicable. The amount of retention held (excluding VAT) as at the 31st March 2018 must be accurately recorded. This amount will attract 14% VAT when released. All retention (excluding VAT) accumulated and held thereafter, will attract 15% VAT when released.

The above recommendation is to be applied at sole discretion of the reader.

We also attach the Pocket Guide on the VAT rate increase on 1 April 2018 published by SARS.

For any further guidance please consult a tax expert.